Climate Change and the Effect on the 30-Year Mortgage
Climate change has many consequences, some of which we see now such as stronger hurricanes, increase in the number of fires, and something that is not talked about currently as much, housing and the 30-year-mortgage. The 30-year mortgage and what affect it will have on American homebuyers if we change the standard is not talked about much and it should be, as people might have trouble paying a mortgage in the future if the span of time is shortened because of flooding, hurricanes and other natural events.
Richard Aurisano, a Geology professor at Wharton County Junior College, believes people might be worried their house will not survive for 30 years with increased wind speeds, flooding and other natural disasters. These factors might force people to take out shorter mortgages. Aurisano also believes increased flooding inland and along the coast from global warming could cause greater losses than the 2008 housing crisis because storms as strong as Hurricane Ike, Katrina and Harvey could happen more. This could cause insurance companies to refuse to insure the houses or cause the cost to rise. People may not be able to make payments on the house because of the shorter mortgage period and then banks would have to foreclose on the house to get the best price for it.
This would cause fear of the future which causes an inability to plan and leads to short-sighted decisions.
Aurisano said there is little we can do as far as climate change. He believes we have to accept its happening and that people in finance need to come up with a solution as far as housing. Aurisano believes a lender’s attitude about climate change will affect mortgage origination.
Doctor Cumaraswamy Vipulanandan, a Civil & Environmental Engineering professor at the University of Houston, thinks because of the increased wind speeds caused by climate change, housing rules and regulations as well as the quality of the buildings might change causing housing prices to increase. This would make sense as the materials needed to make houses would increase, causing houses to be priced higher. Vipulanandan thinks that doing certain things, such as college campuses and people collecting rainwater when it rains and slowly letting it get absorbed into the ground would be a good solution. This way there is less water to cause flooding when it rains or a natural disaster occurs.
“Humans have to take charge of it,” he said, referring to doing what we can as far as preventing loss due to more extreme weather.
Vipulanandan thinks that fewer people will take out 30-year mortgages because of climate change but says it should not stop people from buying homes.
Mr. Varun Gupta, an Accounting and Principles of Macroeconomics professor at Wharton County Junior College, does not think the lender’s attitude about climate change will affect the mortgage origination because people shop around for the lowest interest rates and people do not tend to pay attention to that level of detail. He thinks climate change might result in shorter mortgages. He said that as the climate gets warmer it will impact the land. Land in parts of the world will no longer be suitable for growing fields of food because it will be too warm, which will cause people to move into areas where things can be grown. Then workers will be laid off in that area and they will either have to move with the company or find other work which means having a 30-year mortgage would be pointless.
“This is something the Federal Reserve is paying attention to right now,” he said.
The biggest thing that would underpin what is going on in regards to housing and climate change is climate change deniers. They would make any ideas to solve this impossible to implement.
People either believe heavily in climate change or do not believe in it at all which is a problem as that means nothing will change.
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